1.
Is there room for both an independent video rental store such as
Video Vault and a large chain suchas Blockbuster in this market?
Given that there is a significant popoluation in the Massachusetts market in this
case, the product beingsought after was limited and it has been
‘first
in queue
is first served’ scenario; there was the potential
for Video Vault to co–exist with growing (at that time) national chain giant
Blockbuster.This is going to need to be qualified by the understanding
that this is based on the partial agreement of
the Video Vault’s management’s interpretation
, at least in the short term of 1 to 5 years. Many smallvideo stores are closing.
Thus an addition of customers from reduced competition, meaning
an increaseof market share. The actual transaction that is theoretically a promise,
that cannot be met, will beunfulfilled need of the client base. There simply
will not be enough videos (supply) to accommodate thenumber of
customer requests(demand) at the beginning time interval of the T equal zero to 3
or 4weeks by a single location per demographically area. Another factor
is who benefits from operationsaspect. The contingent employee at a large
chain organization has no vested interest in customersatisfaction beyond a bare
minimum. There is no reason for the actions of the frontline at a
nationalchain that has no motivation, to be participating in demand
satiation. That results in the loss of anopportunity to the nest step in the
supply chain structure. While a single transaction may not appearsignificant, it is
the single point from which a steady stream of inflow could be lost. Including
thoseclients that simply use other older equipment and mentality.Although, all
these factors are compelling reasons that Video Vault could share the market with
thecompetitor Blockbuster, it will not be viable in the long term beyond
5 to 7 years.
If you were managing Video Vault, how many copies of Heist, A.I., and Zoolander would
youstock?
It is difficult to predict the number of copies that need to be purchased since the peak demand for
anew rental lasts only a few weeks. In addition, the cost of a video is relatively high, revenue sharingdoes bring
down the cost of the video, but Video vault does not have any revenue sharingagreements.The number of
copies that Video Vault should stock for these movies should be based on thepopularity of these
movies. I expect more demand for rentals if the movie is more popular. Basedon the data in Exhibit 1, A.I has the
largest box office receipts followed by Heist and Zoolander. Thehistoric data in Exhibit 2 can be used to come up
with the number of copies by comparing the boxoffice receipts and budgets that are similar to these
movies. Video vault collects $3 per rental,therefore for a $65 VHS movie; it would need 22 rentals to recover the
